How to sell inherited property, step by step

How to sell inherited property: the short answer

You can sell an inherited house once the person selling has the legal right to transfer it. In practice that means one of three things: a court has appointed an executor or administrator in probate, a successor trustee is acting under a living trust, or the title already passed to you outside probate, for example through joint ownership with a right of survivorship or a transfer-on-death deed where your state allows one.

After that, the steps are familiar: secure and insure the house, get a sense of its value, choose how to sell, and close through a title or escrow company. The details vary by state, so treat this as a map and confirm the specifics with a probate attorney where you live.

It also helps to know what you're not required to do. You don't have to keep the house, live in it, fix it or wait a set amount of time before you sell inherited property. Once the authority question is settled, the timing is up to the estate and the heirs.

Step 1: Find out who can sell inherited property

Start with the paperwork. Look for a will, a trust, and the current deed, which you can usually get from the county recorder. The deed shows how the owner held title. That tells you whether the house goes through probate or passes another way.

• Will, no trust: usually probate; the court appoints the executor named in the will
• No will: usually probate; the court appoints an administrator and state law decides who the heirs are
• Living trust holding the house: the successor trustee can often sell without probate
• Joint tenancy with survivorship or a transfer-on-death deed: title may already belong to the survivor or beneficiary

Step 2: Protect the house while the estate is settled

An empty house is a liability until it sells. Tell the homeowner's insurance company the owner has died; many policies limit coverage for vacant homes, so ask what's required. Keep the utilities on at a basic level, lock up, forward the mail, and check on the property regularly.

Keep paying the mortgage, property taxes and any HOA dues from estate funds if you can. Missed payments add late fees and, eventually, foreclosure risk. Federal law generally stops a lender from calling a loan due just because the house passed to a relative at death, and you can ask the servicer to recognize you as a successor so you can get account information.

Step 3: Get a value for the inherited house

Get a professional appraisal as of the date of death, even if you plan to sell soon. That figure usually becomes the starting point for taxes (more on that below), and it gives the heirs an objective number to agree on. A separate market analysis from a local agent can tell you what the house might sell for today, as-is and after repairs.

Be realistic about condition. Inherited houses are often dated, and some have deferred maintenance that the owner stopped keeping up with: an old roof, original wiring, a furnace near the end of its life. Ask for two numbers: what the house would sell for as it stands, and what it might bring after repairs. The gap between them, minus the cost and time of the work, tells you whether fixing it up is worth it before you sell inherited property.

Step 4: Agree with the other heirs

When several siblings inherit together, the hardest part of selling inherited property is often agreement, not paperwork. Talk early about whether anyone wants to keep the house, who pays the ongoing costs while it's for sale, and how much repair work, if any, the estate will fund. Put the plan in writing.

If one heir wants to buy the others out, they'll need an appraisal and financing or cash. If heirs can't agree at all, many states allow a co-owner to ask a court to order a sale, called a partition action. It's slow and expensive, so it's usually a last resort.

One heir often ends up doing most of the work, especially the one who lives closest. It's fair to agree in advance whether that person will be reimbursed for costs they pay out of pocket, such as utilities, insurance or a lawn service, before the proceeds are split.

Step 5: Choose the best way to sell inherited property

There are three common paths. Each one trades price against time, work and certainty, so compare what you'd net, not just the headline number.

• List with an agent: often the highest price for a house in good condition, but expect clean-out, repairs, showings and a buyer's loan approval
• Sell as-is on the market: less prep, but financed buyers may still ask for repairs or credits after inspection
• Sell directly to a cash buyer: no showings, no repairs, no clean-out in many cases; the offer prices in the condition

Taxes when you sell inherited property

Inheriting a house isn't income for federal tax purposes. When you sell, though, any gain may be taxable. For most inherited property, your tax basis is "stepped up" to the fair market value on the date of death. If you sell for close to that value, there may be little or no taxable gain. Gain on inherited property is generally treated as long-term no matter how long you held it.

There's no federal inheritance tax, and the federal estate tax applies only to very large estates and is paid by the estate. A small number of states have their own estate or inheritance taxes. Because the rules depend on your state and your situation, talk with a tax professional before you sell.

A few practical points help. Your selling costs, such as commissions and closing costs you pay, generally reduce the gain. When siblings inherit together, each heir usually takes a share of the basis that matches their share of the house. If you move in and make the house your main home for long enough, the home-sale exclusion may eventually apply instead. Keep the date-of-death appraisal with your tax records, because it's the best evidence of your basis if anyone asks later.

When the inherited house has a mortgage, liens or back taxes

Debts on the house don't stop you from selling it. A mortgage, a home equity line, unpaid property taxes or a recorded judgment are all paid from the sale proceeds at closing, in the order the law requires, before the estate or heirs receive the rest. The title company finds these during its title search and orders payoff figures.

If the debts are larger than the value of the house, the sale gets more complicated. The lender may need to approve a sale for less than the payoff, and the estate's other debts may need attention under state law. A probate attorney is the right person to ask before you sell inherited property in that position.

What to watch for when you sell inherited property

Don't sign a listing agreement or purchase contract until you have authority to sell. Don't throw away paperwork that may matter later, like tax bills, the mortgage file or receipts for improvements. Disclose what you know about the house; heirs who never lived there may disclose less, but rules vary by state. And verify any buyer: ask who is buying, see proof of funds, and use a title company you can confirm independently.

How to sell inherited property with Prominent

Prominent Cash Offer buys inherited houses directly, as-is, in any condition. There's no need to empty the house or fix it first. Share the address and the situation; if the property is a fit, you'll get a written cash offer with the terms spelled out. There are no fees or commissions, we pay the closing costs, and the estate or the heirs choose the closing date, which helps when you're waiting on court approval. There's no obligation, so you can compare it with listing first.